CLIFFSIDE APARTMENTS
Gig Harbor, WA

CMREG purchased Cliffside, formerly Puget Woods Apartments, a 54-unit complex located in Gig Harbor, Washington. The purchase included ten additional, contiguous, but undeveloped acres of land.

Cliffside is located directly across the Tacoma Narrows Bridge from the City of Tacoma, Washington. The actual mailing address is the community of Gig Harbor. The Gig Harbor Peninsula is one of the most desirable and scenic locations in the Puget Sound region.

The original developer had purchased the property for condominium conversion. The fortunes of the developer and his creditor, an Oregon Savings and Loan, began to decline. The developer filed a Chapter 11 bankruptcy proceeding, and the S&L was sold to a major West Coast commercial bank under a regulatory managed merger. CMREG was able to acquire the property at a fraction of its market value because most regulatory managed arrangements are accompanied by a significant write down of assets.

Prior to purchase, CMREG did an areawide, informal survey and determined the following:

• The most expensive area homes border the subject site;
• This area has been a notable pocket of condominium sales of “high end” units;
• Rental vacancy rates were negligible; and
• Highly restrictive zoning maintains barriers to market entry.

In addition to these factors, the key to this transaction was the ten additional acres, substantially adding to the value of the investment.

After closing, CMREG optioned an additional 17.5 acres immediately adjacent to the above-mentioned site, which, amongst other things, granted the assemblage more than 700 lineal feet of beachfront overlooking the Tacoma Narrows. Pursuant to a series of applications, the Pierce Country Planning Department granted site plan approval for the development of 225 luxury apartment units on the 27.5 acres of undeveloped land in the assemblage. This development represents the largest multi-family project in the history of the Gig Harbor Peninsula.

Construction of the new 225 apartments, and renovation of the existing 54 units, commenced with construction financing arranged through Key Bank of Washington. With successful lease-up completed, the construction loan was refinanced with a fixed rate permanent loan with a ten-year term.